Shares of “crypto first” Coinbase Global (NASDAQ: COIN) have slumped to new lows ahead of the one-year anniversary of their listing .
Market data shows that COIN fell 23% in early U.S. stock market trading on Wednesday, and its share price was $56 per share as of press time, down more than 70% year-to-date. Investment bank Goldman Sachs downgraded COIN to neutral from buy, saying that unless the crypto market rebounds, the company is unlikely to reach expected profitability in the short term.
Like other tech stocks, Coinbase has been affected by the macro environment as well as the Fed’s tightening monetary policy. The company’s latest earnings data showed a net loss of $430 million in the first quarter of 2022, with revenue falling to $1.17 billion, missing Wall Street analysts’ target of about $1.5 billion.
In the post-epidemic era, following the financial market that is “falling and falling”, what has Coinbase experienced from its successful listing to its performance losses?
Listing is brilliant
On April 16, 2021, under the title of “crypto first stock”, Coinbase landed on Nasdaq through direct listing, opened at $381, and rose to $429.54 within minutes after starting trading, closing at $429.54. 328.28 US dollars, with a market value of 85 billion US dollars on the first day of listing.
The company became one of the highest-ever first-day tech stocks, based on its first-day closing levels, on par with Facebook (FB) on its first day of trading in 2012 and Airbnb (ABNB) on its first day of trading in 2020.
A year later, Coinbase’s market cap has shrunk to around $15 billion, a drop of 80%.
In a note to clients, Goldman Sachs analysts said: “We believe COIN stock will struggle to outperform the broader market in the near term in an environment focused on profitability, recession risk and the fading boom in pandemic-driven retail trading . “
In a note, JPMorgan analysts wrote that revenue “were lower than expected across the board, while expenses grew faster than expected, leading to a sharp drop in earnings.”
In fact, the trend of COIN is inextricably linked to the violent volatility of Bitcoin, such as 2019, which coincided with the crypto bear market, and Coinbase lost $31 million that year.
Loss of main business users
Coinbase is losing users as rising investor unease about risk assets has translated into a drop in cryptocurrency prices.
The company’s monthly transacting users fell by more than 2 million in the first quarter from 11.4 million in the fourth quarter to 9.2 million. Trading volumes fell 44% and total trading revenue fell 56%. Adjusted EBITDA fell to $20 million in the first quarter from $1.2 billion in the fourth quarter of last year.
The company expects monthly trading users and volumes to continue to decline in the second quarter.
Coinbase CFO Alesia Haas explained in the earnings call: “Nasdaq is down, Bitcoin is down, and that’s causing less and less dollars to go into cryptocurrencies.”
The main source of revenue for crypto exchanges is transaction fees, and most of Coinbase’s revenue comes not only from trading volume, but also from US customers. Coinbase said in its shareholder letter that the trading volume from retail or individual investors was higher than the previous quarter. dropped by more than half.
On the bright side, retail rates — or retail transaction revenue as a percentage of retail transaction volume — rose in the first quarter compared to the fourth quarter of last year. Analysts have long feared that the ratio (currently 1.31%) would drop sharply over time, according to CNBC, and new data suggests that Coinbase’s relatively established brand is valuable to customers, and that it ‘s pricing strategy is working.
Diversification expansion leads to higher spending
Coinbase’s attempt to diversify its revenue through international expansion and the launch of new products has led to a significant increase in spending, weighing on the company’s performance.
Operating expenses show that the company’s spending is still in a high growth phase. The first-quarter earnings report showed that overall operating expenses were US$1.72 billion, an increase of nearly 70% in six months. This is the first time that operating expenses have exceeded revenue since the data was released.
General and administrative expenses were $414 million, up 39% from the previous quarter. Coinbase attributed the increase to increased headcount related to full-time and outsourcing. According to the company, the purpose of the spending is to “invest in strengthening and expanding our customer support, legal, compliance and business support functions”.
Bitui previously reported that Coinbase plans to hire 6,000 new employees in 2022, mainly for international expansion. On April 4, CEO Brian Armstrong announced that it would hire 1,000 employees to support its expansion in India.
Coinbase President and COO Emilie Choi added on the company’s earnings call that the company has also invested heavily in compliance: “This is important to us because it helps us strengthen our relationships with customers and regulators. “.
NFT business is tepid
Coinbase recently launched its own marketplace for non-fungible tokens (NFTs) called Coinbase NFT, which is currently tepid.
According to public blockchain data provided by metrics website Dune Analytics , on the first day Coinbase NFT opened to the public, there were fewer than 150 users and a total transaction volume of about $75,000 in ETH, which is more than the price of a boring ape NFT. Low. At press time, Coinbase NFT has a total of 1,848 active users.
In contrast, OpenSea, the largest NFT trading platform, has a monthly trading volume of billions of dollars, and it remains to be seen how Coinbase will play catch-up.
Coinbase NFT will seek to carve up market share from OpenSea and launch its killer feature, zero transaction fees, for a limited time, Sanchan Saxena, vice president of Coinbase NFT product, said in a news release last month.
Risks and Market Outlook
In a 10-Q filing with the U.S. Securities and Exchange Commission on Tuesday, a newly disclosed risk factor from Coinbase caught investors’ attention: “In the event of a bankruptcy, the cryptoassets we hold on behalf of our clients could be affected by bankruptcy proceedings, and these clients can be considered our general unsecured creditor.”
According to the disclosure, as of March 31, 2022, Coinbase held $256 billion in custodial fiat currencies and crypto assets — the latter not insured or guaranteed by any government entity. This means that if Coinbase declares bankruptcy, customers will not have access to funds.
The revelation sparked comments on social media, with Coinbase CEO Brian Armstrong clarifying on Twitter: “Your funds are safe at Coinbase, as they have always been… We are not at risk of bankruptcy; however, We have included a new risk factor in accordance with the SEC’s requirements, called SAB 121, which is a new required disclosure for public companies that hold cryptoassets for third parties.”
Despite the lackluster quarter, some analysts are optimistic about Coinbase. BTIG analyst Mark Palmer believes that the share price decline appears to be “exaggerated” given liquidity and long-term growth prospects, keeping COIN at a Buy.
Palmer wrote: “While we remain awake to the potential impact of a severe Fed tightening cycle and the potential for that cycle to lead to a recession, we believe COIN pricing(1) fails to reflect the company’s ample liquid assets, including $6.1 billion in Cash and about $1 billion in cryptocurrencies for investment, cash alone equivalent to nearly one-third of its market cap at Tuesday’s close, (2) ignoring its established leadership in the digital asset space and its multiple avenues for growth, including Institutional crypto prime brokerage platforms, the growth of the recently launched NFT market, and the potential upside and attractive yields of staking products.”
Coinbase doesn’t appear to be concerned about its long-term prospects and sees the market downturn as an opportunity to build. “We do not believe these market conditions are permanent and we remain focused on the long-term … as we continue to invest and enhance our core investment platform, led by NFTs and decentralized finance,” the company wrote in its shareholder letter. The era of cryptographic applications has arrived, and we are increasingly focusing on these market opportunities.”
It can be seen that Coinbase has made a lot of preparations for its long-term development since its listing one year ago: global expansion, NFT, pledge income products, etc., the follow-up development remains to be further observed, as mentioned in its shareholder letter, “# wagmi” (we will all succeed) good vision to look forward to.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/what-happened-to-crypto-first-stock-coinbase-for-the-first-anniversary-of-its-listing/
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